IMF warns of risks to the world economy

MADRID — IMF chief Rodrigo Rato said yesterday that large US current account deficits posed a risk to the world economy and warned that a sharp drop in inflows into US bond markets could have serious consequences for markets.

By (Reuters)

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Published: Sat 2 Apr 2005, 9:16 AM

Last updated: Thu 2 Apr 2015, 3:56 PM

Rato said he saw a “downward bias” on the short-term risks to the global economy and warned that the oil market remained ”highly susceptible” to shocks as excess capacity was very low.

On the upside, strong corporate balance sheets and wealth created by rising equities markets could lead to stronger than expected global domestic demand, he said in a speech to the Institute of International Finance meeting in Madrid. “On the downside, the key risks include further exchange rate volatility, faster than expected rises in interest rates ... and extended weakness in the euro area and Japan,” Rato said.

The US current account deficit widened more than expected in the fourth quarter of 2004 to a record $187.9 billion.

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